FINANCIAL TIMES: Tommy Hilfiger: a name traded for an empire

FINANCIAL TIMES | ELIZABETH PATON
As New York Fashion Week got under way last week, the Manhattan offices of Tommy Hilfiger were a frenzy of activity. The preppy Americana that has come to define the brand was evident at every turn. Young workers in pressed chinos scurried down corridors, past walls covered with artfully-distressed Stars and Stripes flags and Pop Art posters. The phones rang relentlessly and the underlying mood appeared to be one of polished panic.

But a chirpy Mr Hilfiger, who today will take a catwalk bow following the unveiling of a spring/summer 2015 collection, remained unflappable in the middle of the storm. “I’ve been in the fashion business for a good 40 years so I’ve seen it all before,” he says with a smile.

The 63-year-old’s career has certainly included a lot of twists and turns. The second of nine children, born and raised in small-town upstate New York, Mr Hilfiger had early aspirations of playing American football professionally before being told that he was too small. In 1969, aged 18, he turned his attention to starting a business selling jeans and bell-bottomed trousers to kids on college campuses, who wanted to emulate their rock and pop star idols.

“My parents were furious – they were desperate for me to go to college,” he recalls. “I wasn’t listening. I knew I was an entrepreneur. I had found this great gap in the market.” But without any real understanding of the mechanics of a business, he was bankrupt by 25. Mr Hilfiger calls the experience “my version of an MBA – and a hell of a rude awakening”.

He remained undeterred when it came to his long-term goal, later moving to Manhattan to freelance. In 1985, with the financial backing of Indian businessman Mohan Murjani, Mr Hilfiger felt ready to launch an eponymous label.

He did so with a brash Times Square billboard that bracketed the newcomer alongside great menswear designers such as Calvin Klein and Ralph Lauren: “It was a huge gamble, and at the time I was terrified the old guard would bury me, a cocky young upstart jostling his way straight past the velvet rope.”

But the risk paid off and the brand became a hit. Mr Hilfiger realised that this time round he was not interested in managing the business, so in 1989 he sold it to Canadian entrepreneur Lawrence Stroll and Silas Chou, the Hong Kong-based fashion and textile tycoon. While the deal saw Mr Hilfiger retain a 22.5 per cent stake, he relinquished control of his own name. He insists that the loss of ownership is not something he has grappled with.

“There was a stage when I considered just running the business and keeping the rights to myself. But I knew it would have remained a small business, and I wanted to build an enduring global brand – and we did,” he says leaning back in his chair, adding that the group’s sales doubled year on year consistently until it floated on the New York Stock Exchange in 1992.

“You build a highly talented team around you who excel where you have weaknesses – collectively, you have a share in the assets, and are invested in the long-term success of the company. It’s the formula that worked for me,” he says.

A crucial part of Tommy Hilfiger’s history is longtime chief executive Fred Gehring – who moved to the role of chairman this summer – and who oversaw the group’s rapid international expansion, fuelled by numerous licensing deals.

Mr Hilfiger, meanwhile, became an early pioneer of fashion branding through celebrity relationships, forging deals with rappers and hip-hop stars to take the brand to cult-like status as the urban streetwear uniform of choice. The product
portfolio sprawled from babywear to underwear, perfume to home furnishings.

“The beauty of our brand was that it appealed to a broad audience of age groups and economic backgrounds, colours and creeds. It had credibility via star power,” says its founder.

Today, some of the biggest players in the global fashion market are US affordable luxury brands such as Michael Kors, Tory Burch and Ralph Lauren, aided by aspirational spending by the middle classes in mature and emerging markets. Mr Hilfiger says he has been operating in that pricing sweet spot for decades.

“For years we weren’t truly respected by the haute fashion crowd – they didn’t consider us ‘luxury’ enough. But we knew that brand-driven dressing isn’t something that only resonates with consumers at the highest end of the spectrum. We understood this long before anyone else.”

There have been what Mr Hilfiger wryly calls “a few bumps in the road”.

After being adopted then abandoned by the rap community and teen market, there was a sharp decline in sales in the early 2000s. Oversupply meant the Tommy Hilfiger brand became commoditised in the US and the company’s stock suffered heavily. A $1.6bn buyout by Apax Partners fuelled an expansion in Europe as the group struggled with a drop in orders from American department stores, before the private equity firm then sold it on to PVH for $3bn in 2010. The listed PVH, which also owns Calvin Klein, remains its owner.

“I’ve worked with every type of investor or backer, been public and private, but where we are today – in the stable of a global powerhouse who offer us great growth acceleration and a superior logistical set-up – is right where we want to be,” says Mr Hilfiger, who now holds the title of “principal designer and visionary”.

The brand is not without vehement critics. “An entire snow scene complete with pines and ski lift could not conceal the banality of a tartan-meets-sheepskin ‘Rocky Mountain High collection’,” ran the FT verdict on last season’s catwalk show.

But others are more forgiving. “Tommy is like a cat with nine lives and I don’t think he gives a damn what the sceptics say,” says luxury brand consultant Robert Burke. “Perhaps what ultimately held him back creatively was he was always a little too eager to make money. But he and his partners have been laughing all the way to the bank.”

In PVH’s most recent quarterly results, announced last week, Tommy Hilfiger revenues rose a healthy 9 per cent to $870m. Mr Hilfiger is wealthy enough to stop working if he wanted. But he still “obsesses relentlessly” over honing details, colour and fit across his collections, as well as advertising and social media campaigns.

A contemporary art collector with a property portfolio that includes a New York penthouse that went on the market last year for $80m and a Miami hotel that he calls a “dream renovation project”, Mr Hilfiger says personal pastimes often spark his professional vision. “Colours and cultures from my hobbies, travel, conversations with my family so often underpin and inspire the point of view of a new collection. A life outside the office is essential for any creative, operating in any area of design.”

The designer says there has been a tectonic shift in the fashion sector, triggered by globalisation. He points to “fast fashion” brands such as Zara, H&M and Topshop “on every street corner, offering great product and great prices”. Still, he argues that in the battle for the hearts, minds and wallets of shoppers, there will always be a place for labels that are selling a dream alongside a pair of jeans.

“Those companies will ultimately never have true brand equity because they’re first and foremost retailers. Our flag logo is one of our biggest assets – it’s a visual association that resonates with people wherever they are and lets them know the lifestyle they are buying into,” he suggests with a grin.

“There will always be shoppers buying what we’re selling. Ultimately, the star power of designer brands is something that will never wane.”

Tommy Hilfiger’s CV

Education: High school graduate; immediately sets up own business, People’s Place, in 1969